San Bruno Calls for Removal of CPUC President, Investigation by
Governor, A.G., Legislature, DOJ Following Exposure of Documents
Revealing Illegal Relationship Between CPUC and PG&E

San Bruno Seeks Independent Monitor to Oversee CPUC

July 28, 2014 06:48 PM Eastern Daylight Time

SAN FRANCISCO--(BUSINESS WIRE)--The following is a statement by the City of San Bruno:

In a series of significant legal and regulatory motions, the City of San
Bruno today demanded the immediate removal of California Public
Utilities Commission President Michael Peevey and substantial penalties
against the Pacific Gas and Electric Co. after it was exposed that top
CPUC and PG&E staff engaged in repeated and illegal private (ex parte)
conversations in the ongoing CPUC penalty proceeding related to the
deadly 2010 PG&E gas pipeline explosion in San Bruno.

“Today’s disclosure demonstrates an ongoing, illicit and illegal
relationship between the CPUC and PG&E,” said San Bruno Mayor Jim Ruane,
who released more than 7,000 pages of documents received after San Bruno
filed a Public Records Act lawsuit against the CPUC.

The documents reveal that Peevey received confidential, non-public
information from PG&E regarding its internal deliberations and financial
conditions outside of the CPUC public hearing process and in violation
of the Commission’s own rules forbidding ex parte (private)
communications between parties and decision makers.

“Not only do these private communications violate the law, but they
provide evidence of a relationship between the utility and the CPUC that
is familiar, collegial and cozy,” Ruane said.

“The National Transportation Safety Board found this cozy connection to
be one of the contributing causes of the PG&E San Bruno disaster and
now, almost four years later, we are seeing these same types of
relationships perpetuated under the leadership of President Michael
Peevey and PG&E President and CEO Tony Earley. We are shocked and demand
immediate action,” he added.

In addition to calling for Peevey’s immediate removal from the
investigatory proceedings to determine PG&E’s fines and penalties, the
City of San Bruno has requested that PG&E be sanctioned for the
violation of CPUC rules. The City has also called for an investigation
of PG&E’s misconduct in the case.

“When Tony Earley became head of PG&E, he told the public it was a ‘new
day’ for PG&E and that a new culture of safety would happen under his
leadership. Sadly, that statement is not true. PG&E is the same company
today that it was prior to the tragedy in San Bruno,” Ruane said.

The City repeated its demand for the appointment of an Independent
Monitor to oversee the CPUC and PG&E to ensure transparency and
guarantee that the actions of this public agency are no longer subject
to undue influence from PG&E.

Ruane said San Bruno filed legal challenges and demands today for
investigations into the matter with the United States Department of
Justice, the Office of Governor Jerry Brown, Attorney General Kamala
Harris, the Inspector General of the Department of Transportation, San
Mateo District Attorney Steve Wagstaffe, San Francisco District Attorney
George Gascón, Senator Jerry Hill and others.

The CPUC is currently in the stage of overseeing the penalty and fine
proceeding against PG&E for its gross negligence in the 2010 San Bruno
explosion and fire that killed eight San Bruno residents, injured 66 and
blew a hole in the heart of the City.

Operating under the belief that an illicit relationship persisted
between California’s regulator and its largest public utility, San Bruno
made its initial request for the CPUC materials on May 30, 2013 and sued
the CPUC on Feb. 3 this year to force production of materials.

San Bruno confirmed the right to review public records and
correspondence between PG&E and Peevey and senior CPUC staff after it
succeeded in its lawsuit to force the CPUC to produce public documents
through the California Public Records Act – a victory the City believes
will change the way the CPUC complies with public record requests in the
future.

“The communications reveal the depths of this hidden relationship
between the CPUC and PG&E – one so deep and pervasive that San Bruno
believes it has invaded the very soul of this alleged public agency,
corrupting its ability to carry out its mandated function and blinding
it to the mortal dangers faced by the public,” Ruane said.

CPUC proceedings, like traditional legal proceedings, expressly prohibit
private (ex parte) communications between one party and the decision
maker in the case—without the knowledge or presence of the other side in
the case. There are stiff penalties and fines associated with breaking
the ex parte rules.

“These documents prove a knowing and intentional effort by PG&E to deny
the public due process of law and attempt to illegally influence the
outcome of four years of CPUC investigations and hearings,” Ruane said.

“These illicit communications and meetings reveal bias on the part of
Peevey to protect PG&E’s best interests. This misconduct has irreparably
harmed the CPUC’s impartiality in determining PG&E’s penalty and fine
for its gross negligence in the 2010 explosion and fire in San Bruno,”
he added.

The private emails over the past 36 months expose more than 40 egregious
violations of the law against ex parte contact by Peevey and top CPUC
staff in the San Bruno case, including Carol A. Brown, chief of staff to
Peevey, Paul Clanon, executive director of the agency, and others.

Cherry and Doll actively advocate for PG&E’s position without disclosing
any of this communication to San Bruno or the other participating
parties, in violation of the CPUC’s own regulations.

Key information within these emails expose:

Cherry influencing Peevey’s decision about the size and scope of the
penalty by continuously forwarding Peevey private analyst reports and
internal PG&E documents that illustrate the implications of a large
penalty on PG&E’s financial outlook.

Cherry and Doll seeking counsel from CPUC staff regarding a
recommended strategy for conducting the best outcomes for PG&E.

Peevey and his top staff providing PG&E executives with insights and
updates benefiting PG&E.

Cherry influencing Peevey’s decision about the gravity of the
situation by forwarding Peevey emails from PG&E CEO Tony Earley and
others explaining why the violations are not that egregious.

Cherry demonstrating PG&E’s good faith in seeking compliance by
forwarding Peevey press releases and other communications showing how
PG&E is taking necessary steps to fix a broken system and make
progress post the San Bruno explosion and fire.

When taken in its entirety, the email traffic shows that PG&E has
unfettered access to Peevey, that PG&E’s executives feel comfortable
enough with Peevey to email “Mike” on a regular basis and that Peevey
does not discourage, warn or admonish PG&E from providing highly
sensitive information on a consistent basis.

“The fact that these ‘off the record’ communications occurred with the
defendant (PG&E) and judge (CPUC’s Peevey) in the most high-profile,
high-stakes investigations to come before the CPUC creates a total loss
of confidence and transparency in what should be an open, honest, fair
judicial process,” Ruane said.

“As the loss of eight lives in San Bruno attest, this is a serious
situation in which the safety of Californians, the future of
investor-owned utilities and the credibility of regulatory mechanisms is
at stake. These pervasive, ongoing relationships and the actions of
Peevey demonstrate an utter and complete disregard for the lives Peevey
has been sworn in to protect.

“Peevey’s willingness to consistently violate the rules of the CPUC
similarly threatens the credibility of the State of California and its
ability to adequately regulate and protect the citizens of this state,”
Ruane added.

Ruane said the timing for Peevey’s removal and a state investigation is
dire - the CPUC proceedings are coming to a close within the next few
months and the CPUC will be confronted with levying historic
penalties/fines against PG&E in the largest natural gas disaster in U.S.
history.

“Consequently, we cannot have the same man who has proven to be biased
presiding over the so-called ‘penalties’ that the CPUC will levy against
PG&E. Nor should the citizens of our state be endangered by the CPUC’s
inability to ensure pipeline safety issues,” he said. “More than ever,
now is the time to appoint an Independent Monitor who can apply the
objective oversight badly needed to restore the public’s broken trust in
PG&E and in this Commission.”

San Bruno has called upon the CPUC to levy a maximum fine and penalty
against PG&E amounting to $2.45 billion in after-tax dollars for its
gross negligence in the San Bruno tragedy. This penalty would fund
ongoing safety improvements thereby alleviating the burden to ratepayers
and would give no credits for past expenses. San Bruno based its
recommendation on a report by Overland Consulting, independently
commissioned by the CPUC in 2012, which found that PG&E could afford a
penalty of this magnitude without hurting its creditworthiness.